Recently, climate change has come to the forefront of contemporary and social issues.
Due to expedite in global environmental issues, the low-carbon concentration and content of natural gas have made natural gas a major energy source of most economies.
First, natural gas is much more environmental friendly than the combustion of coal, and also relatively cheaper.
Furthermore, natural gas is the cleanest and most hydrogen-rich of all the hydrocarbon energy sources, and it has high energy conversion efficiencies for power generation.
Against this backdrop, natural gas consumption has grown substantially, stimulated by surges in economic activities, colossal investments in new infrastructural technologies, and domestic price subsidies.
Findings from research have consistently depicted that natural gas has a positive and significant effect in facilitating economic growth in both the long and short-run.
Therefore, any disruptions and volatilities in natural gas supply and pricing would have a significant outcome on economic growth.
The supply and price volatility is considered the most distinctive feature of natural gas in the past decade.
As natural gas is increasingly becoming the principal source of electricity, its price volatility is forecaste to influence electricity markets. Natural gas is a unique energy source with its multiple primary uses in feedstock, electricity, heat, and transportation.
Similar to other commodities, natural gas is often determined by demand and supply. Taking a critical look at the gas sector, the total demand for natural gas varies seasonally while supply somewhat experience shocks on a distribution scale.
Predominantly, the cost of storage cause volatility and price changes to balance such a potential mismatch in demand and supply.
The year 2020 is experiencing the largest recorded demand shock in global natural gas markets due to the COVID-19 pandemic.
Globally, gas consumption has been projected to experience a decline of 4%.
With this unprecedented shock in gas consumption, the robust supply and trade adjustment has resulted in historically low spot prices and high volatility.
Although natural gas demand is expected to surge in 2021, the COVID-19 pandemic has been projected to significantly affect the natural gas markets because the key drivers of natural gas demand and supply are subject to high uncertainty.
With such uncertainties looming, what is the future of the gas sector concerning demand and supply? What is the certainty that any projections made in this sector will reflect future happenings?
In an attempt to answer the questions aforementioned, a long short-term memory (LSTM) algorithm is built together with a policy sequencing tool.
Taking a clue from the National Energy Modeling System (NEMS), a ‘look-back’ of five years is deployed to predict consumption and production patterns from the year 2011 to the year 2015. The forecasted values as compared with the actual data values achieve a 99.2% accuracy.
With such a predictive accuracy level, an estimated margin of error of 0.8% is a justifiable reason to forecast the demand and supply of natural gas to the year 2025.
Interesting policy analysis in the demand and supply of natural gas is made in the preceding section which warrants the attention of Ghana National Gas Company Limited.
Natural gas demand
As stated earlier, natural gas demand per the forecast scenario is expected to recover in 2021, with the benefit of economic rebound and lower price estimations.
With regards to medium-term growth potential, over the forecast period of the year 2018 to the year 2025, natural gas medium-term will see a 1.09% average growth rate per year.
Ghana’s natural gas growth projection hinges on future policy direction and pathways to the recovery of the post-COVID-19 era.
Future growth in the gas sector is also dependent on the pace of economic recovery for the domestic and export markets for industrial goods and services.
Based on a strategic and policy analyzing approach, Liquefied Natural Gas (LNG) will continue to remain the main driver of Ghana’s gas trade, with 2022 investment in liquefaction projects estimated to increase Ghana’s export capacity.
In a more short-term (2020-2021), there will be slower growth in liquefaction capacity additions which will limit the risk of a tight LNG market. Ghana is expected to record higher LNG trade levels in a more balanced market.
Natural gas supply
Based on the forecast, Ghana’s natural gas production is expected to increase steadily from the year 2020 to the year 2025 with incremental year-over-year growth in storage surpluses.
In the space of five years, Ghana’s gas surpluses on a business-as-usual forecasting scenario will be enough to supply neighboring countries.
The sector’s ability to rebound in the post-COVID-19 crisis will be crucial to delivering incremental gas production needed to replace the declining conventional natural gas production and supply.
In the long-term, Ghana should invest in natural gas export-oriented projects in the year 2022 where most of the additional production is expected to happen based on the forecast.
In the short-term (2020-2021), Ghana’s gas sector will be marred with uncertainties in production and supply growth which will directly impact the development schedule.